It is often assumed that privatisation or PPPs will result in greater levels of technical efficiency. That is, the private sector can always deliver a given level of service with less input costs than the public sector. Politicians, media, academics and consultants frequently refer to ‘private sector efficiency’. This assumption is often shared even by critics of privatisation.But there is now extensive experience of all forms of privatisation, and re-searchers have published many studies of the empirical evidence on comparative technical efficiency.The results are remarkably consistent across all sectors and all forms of privatisation and outsourcing: there is no empirical evidence that the private sector is intrinsically more efficient. The same results emerge consistently from sectors and services which are subject to outsourcing, such as waste management, and in sectors privatised by sale, such as telecoms.

The report explains why public spending, in particular on public services, is economically and socially vital and not an economic liability. Rising public spending has been part of economic growth for over 100 years; it supports half the formal employment in the world, much of it in the private sector; it delivers services like healthcare and public goods like renewable energy more efficiently and effectively than the private sector. Public spending is an important way of creating greater equality, not only through benefits but through public services. Higher public spending can be financed easily in all countries by taxing the rich, eliminating corporate tax evasion, and property taxes and that public spending and government borrowing are far more efficient ways of funding and providing services than public-private partnerships or privatisation.

Water Privatisation and Remunicipalisation: International Lessons for Jakarta - Apr 2014Emanuele Lobina

This report provides background to the current court case and public debate about the privatised Jakarta water concessions. It seeks to provide international empirical experience concerning privatisation and the role of public sector in water services, in the framework of water as a human right. It uses this experience to identify distinctive features of the Jakarta contracts, and to discuss parallels between the experiences in Jakarta and in the rest of the world. Finally, it offers conclusions in relation to the possible future of water services in Jakarta.

The extensive re-municipalisations in the water sector and France and the energy sector in Germany are a reflection of common political and economic factors. The most important of these are the greater efficiency of public sector provision, and the greater degree of control over the effective achievement of public policy objectives. These are closely related to the historic factors driving public ownership in the 19th and 20th century. A distinctive feature of this 21st century tendency is the prominent role of green parties and environmental policies. The public sector paradigm has historically shown a remarkable resilience, underpinning the development of European public services for almost a century, compared to the three decades of domination by the market paradigm and its currently vacillating foundations.

There have been few major takeovers and mergers in the sector since 2010. The French state is the main owner of both Suez and Veolia, which have both sold their last remaining water companies in the UK to private equity consortia. The main trend in ownership is towards re-municipalisation: other towns and communes in France are following the example set by Paris in 2010 and re-municipalising water services as private contracts expire; the water services in Berlin and Budapest are both in the process of returning to total public ownership; the Italian referendum result is leading to new citizen pressures for re-municipalisation, and multinationals deciding to reduce their presence in the country. However, there is a significant counter-tendency coming from austerity packages in Greece, Portugal and Bulgaria, where water privatisations are part of the planned ways of raising extra income for the state. In Spain, Madrid city council is attempting to privatise the city water company, Canal Isabel II. The major companies – particularly Veolia - are seeking to develop a new business model based on long-term outsourcing of functions by public sector water companies. This poses dangers for both users and employees, as the cost of the contracts squeezes other spending, creates upward pressure on prices and downward pressure on labour costs as a way of boosting profit margins. The EU has published a new paper on water policy in developing countries, which is less focussed on privatisation than in the past, and it has also allocated funding to support public-public partnerships between European and African public sector water operators.

Beyond Europe, the major companies continue to retreat from Africa, while maintaining their operations in Latin America. The stated policy is to concentrate on engineering BOTs, service and management contracts, in north America, eastern Europe, the middle east and China, but both Suez and Veolia have obtained large contracts in India.

This report evaluates the expected impact of the ACP-EU Water Partnerships programme, and compares it with other international programmes of not-for-profit partnerships for capacity development in the water and sanitation sector. It offers lessons for the international water community on fostering the achievement of a critical mass of capacity as a precondition to achieving sustainable water development.

The birth, growth and decline of multinational water companies - Jun 2012

David Hall

Emanuele Lobina

Private water companies largely died out by the start of the 20th century with municipalities and governments taking over the role of investors and operators. The survival of French private companies enabled them to re-launch their business in the favourable climate of neoliberal politics, first in France in the 1980s and then globally, encouraged by international financial institutions. Widespread public resistance and inability to devise a profitable economic model for universal provision drove back these advances, and by the early 21st century the companies had largely withdrawn into engineering and service contracts. In France and elsewhere a process of re-municipalisation has already begun.

The Brazilian government created the Fundo de Garantia do Tempo de Serviço - FGTS (Severance Pay Fund) in 1966. The triple objective was to provide severance pay in cases of unjustified dismissal, create a savings fund for workers and use the fund to finance housing and water and sanitation programmes. Moreover, for the last 21 years, all decisions about administration of the fund and the use of its resources have been taken by a tripartite body, the Conselho Curador do FGTS - CCFGTS (FGTS Board of Trustees). The report describes the history and structure and performance of the FGTS and discusses whether it can be replicated elsewhere. The English version can be downloaded from www.psiru.org/sites/default/files/2012-03-FGTS-EN.doc ; the Portuguese version can be downloaded from www.psiru.org/sites/default/files/2012-03-FGTS-PO.doc